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To Pay or Not to Pay Interns

The first step in determining whether or not it is legal to hire unpaid interns is to determine what laws apply. A combination of federal, state and local laws govern whether or not an employer is required to pay interns.

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In some states, such as New York, state and local laws have adopted language that is specific to interns. This gives certain rights to the intern, regardless of how one might interpret the broad language in the federal law. “Under the FLSA, employees must be paid for all hours worked, at least at the minimum wage rate,” Rachel Bien, a partner at Outten & Golden in New York, says. “The issue for interns is whether or not they are considered employees who are covered by the law.”

Different interpretations exist regarding if an unpaid intern is really unlawfully unpaid employee or someone gaining valuable training and hands-on experience in their field.

The Primary Benefit Test

Some circuit courts have held that the primary benefit test applies under federal law and establishes that, at a minimum in every state, an unpaid internship must be designed to primarily benefit the intern. An unpaid internship might be found unlawful if the primary benefit test indicates that the employer was the primary beneficiary of the work being performed and therefore, the intern is really an employee.

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Bien, who has represented unpaid interns in various cases, says the subjective nature of the primary benefit test is problematic. “It really is, in my view, a departure from the typical standards you apply to evaluate issues under the FLSA,” Bien says. “From an employer’s standpoint, it’s hard to apply such a test to a whole lot of interns at once. I couldn’t imagine any employer that’s going to want to evaluate whether or not to pay someone intern by intern. It doesn’t make practical sense.”

However, the law is designed to protect internships that are truly education with the belief that unpaid internships can be for the primary benefit of the intern if the employer designs the internship with that in mind.

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Bien urges unpaid interns to look for any examples of a paid employee doing the same work as them. “We saw a lot of that in the cases in the fashion industry, where when interns weren’t available they’d hire freelancers and pay them to do the same work. Those are important considerations in terms of whether or not someone is an employee.

“When an intern is working for a private employer and, for the most part, doing assignments as a part of their day-to-day business, that intern is going to most likely be an employee,” Bien continues. “For employers who are concerned about any grey area, the best practice, I think, is to pay them at least minimum wage, which is not a tremendous burden for most private employers.”

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